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Purple Innovation Announces First Quarter Financial Results

May 8, 2024  by HFBusiness Staff in Business Strategy, Industry   

First Quarter Financial Summary (Comparisons versus First Quarter 2023)
~ Net revenue increased 12.5% to $120.0 million compared to $106.7 million.
~ Wholesale revenue increased 33.1% and Direct-to-Consumer (DTC) revenue was consistent with the year ago period.
~ Gross margin was 34.8% compared to 38.0%.
~ Operating expenses were $64.9 million, or 54.0% of net revenue compared to $65.2 million, or 61.1% of net revenue.
~ Operating loss was $(23.1) million compared to an operating loss of $(24.6) million.
~ In connection with refinancing our credit agreement in January, we recognized a loss of $23.6 million related to the change in fair value of our newly issued warrants, a $3.4 million loss on debt extinguishment and $4.5 million of interest expense.
~ Net loss was $(50.2) million as compared to $(25.9) million.
~ Adjusted net loss was $(20.4) million, or $(0.19) per diluted share as compared to $(14.0) million, or $(0.14) per diluted share.
~ EBITDA was $(43.7) million compared to $(19.0) million.
            - Adjusted EBITDA was $(13.2) million compared to $(7.1) million.
~ Cash and cash equivalents were $34.5 million at March 31, 2024.

Chief Executive Officer, Rob DeMartini, said "We are encouraged by our start to the year as our first quarter performance was in-line with our guidance despite continued industry softness. Momentum in our business has been accelerating since the mid-2023 launch of our new product portfolio and brand repositioning, leading to market share gains and a return to growth.

We are making important progress executing the key initiatives that we believe will deliver sequential top-line improvement as 2024 unfolds and allow us to generate positive adjusted EBITDA in the second half of the year. Longer-term, we are confident that Purple's innovative and differentiated sleep technology combined with the team and strategies that we have in place will fuel profitable growth and increased shareholder value."

First Quarter 2024 Review
First quarter 2024 net revenue increased 12.5% to $120.0 million, compared to $106.7 million in the first quarter of 2023. This increase was driven by the positive response to the Company's new product lineup and an increase in wholesale floor slots, partially offset by soft industry-wide demand for home-related products in the current operating environment.

By channel, wholesale revenue increased 33.1% and DTC revenue was consistent with the year ago period. Within DTC, lower e-commerce revenue was offset by growth in Purple retail showroom revenue driven by a shift in sales towards higher ticket mattresses and the net addition of five showrooms over the previous 12 months.

Gross margin for the first quarter 2024 decreased to 34.8% compared to 38.0% in the year ago period. The decrease was primarily attributable to a shift in revenue to the Company's wholesale channel, which carries a lower margin profile than its DTC channel, the use of airfreight in the first part of the quarter, the liquidation of discontinued products, and costs associated with product shipped early in the second quarter.

Operating expenses were $64.9 million, or 54.0% of net revenue for the first quarter of 2024 compared to $65.2 million, or 61.1% of net revenue in the year ago period. The reduction in operating expenses was largely driven by a $3.9 million decrease in general and administrative costs reflecting the non-recurrence of $5.9 million in legal and professional fees incurred by the Board's Special Committee in the first quarter of 2023, partially offset by a $3.3 million increase in marketing and sales expense. Advertising spend as a percentage of net revenues was 10.8% in the first quarter of 2024 compared to 11.0% in the first quarter of 2023.

Operating loss was $(23.1) million for the first quarter 2024 compared to $(24.6) million in the prior year period.

Net loss was $(50.2) million for the first quarter 2024 compared to $(25.9) million in the year ago period. Adjusted net loss, which excludes adjustments for certain non-cash items and other items the Company does not consider in the evaluation of ongoing operational performance, including a $23.6 million loss on the change in fair value of the warrant liability, $3.4 million of losses associated with the extinguishment of debt and a $4.3 million gain from an insurance settlement, was $(20.4) million, or $(0.19) per diluted share, compared to $(14.0) million, or $(0.14) per diluted share in the prior year period. Adjusted net income has also been adjusted to reflect an estimated effective income tax rate of 25.9% for the current and comparable prior year period.

EBITDA for the first quarter 2024 was $(43.7) million compared to $(19.0) million in the first quarter 2023. Adjusted EBITDA was $(13.2) million compared to Adjusted EBITDA of $(7.1) million in the prior year period.

Balance Sheet
As of March 31, 2024, the Company had cash and cash equivalents, of $34.5 million compared to $26.9 million as of December 31, 2023. In January 2024, Purple amended and restated its two primary debt facilities into a new $61 million term loan, thereby adding an additional $22 million of liquidity.

Inventories as of March 31, 2024 totaled $72.0 million, representing a decrease of 17.9% compared with March 31, 2023, and an increase of 7.7% compared with December 31, 2023.

2024 Outlook
The Company is reiterating its 2024 outlook for full year net revenue to be in the range of $540 to $560 million and Adjusted EBITDA between $(20) million and $(10) million. The Company still expects its quarterly revenue and adjusted EBITDA performance to improve sequentially as it progresses through the year with adjusted EBITDA projected to be positive for the second half of 2024.

Conference Call and Webcast Information
Purple Innovation, Inc. will host a live conference call to discuss financial results on May 7, 2024 at 4:30 p.m. Eastern Time. The call can be accessed on the investor relations section of the Company's website, investors.purple.com. A webcast replay will remain available on the investor relations section of the Company's website for 30 days.